Putrajaya overrules Prasarana, takes pricier LRT extension deal

KUALA LUMPUR, June 17 — A Finance Ministry committee has ignored the city’s light rail transit (LRT) operator’s recommendation for the Kelana Jaya line extension project by awarding it to a company whose project price of RM890 million is almost 50 per cent higher than that of the lowest bid.

The Malaysian Insider understands the committee decision was made on Wednesday to hand the electro-mechanical system project to the Hartasuma Sdn Bhd-Bombardier joint-venture, which is already facing a heavy penalty for late delivery of the RM1.2 billion 35 four-car sets to Syarikat Prasarana Negara Bhd.

The Bombardier Group was the original supplier of the 35 Mark II Bombardier Advanced Rapid Transit (ART) two-car trains when the Kelana Jaya line opened in 1998. The first three sets of the four-car trains finally began operation in December 2009, after being delayed from August 2008.

“All bids are technically the same but Prasarana had recommended Ingress Corp Bhd-Balfour Beatty Rail Sdn Bhd, which put in a bid of RM610 million, the lowest against Hartasuma-Bombardier’s RM890 million, which is the highest,” a source told The Malaysian Insider.

Hartasuma is part of the Ara Group which is led by the politically connected Tan Sri Ravindran Menon, who is mainly involved in infrastructure projects and now runs the Subang Sky Park.

The other frontrunner for the project was CMC Engineering Sdn Bhd and UK’s Colas (CMC-Colas) which had a RM670 million bid for the 17km-long extension from Kelana Jaya to Subang Jaya.

It is learnt the Finance Ministry committee decision has caused some disquiet among Prasarana and its consultants as Hartasuma-Bombardier has also not complied with one condition of the tender issued last year — a 10 per cent limit of liability on potential damages.

“Other bidders complied but Bombardier has refused to agree to the commercial condition. No one knows what is going on,” another source told The Malaysian Insider.

The industry source familiar with the tender said the bids did not include the price of Bombardier’s proprietary Linear Induction Motor (Lim) rail system that powers the trains.

“During the tender process, Prasarana removed the supply of proprietary equipment from the tender scope to ensure there was fair competition for the bidders,” he said, adding the Lim equipment is estimated to cost some RM50 million although Hartasuma-Bombardier have yet to give any quotes.

The source said Prasarana and their consultants have been above board in making the recommendation although the final decision lay with the ministry committee which has the power to approve projects worth more than RM300 million.

“It now appears that the Ministry of Finance is approving Hartasuma-Bombardier’s bid for a premium of RM280 million plus the cost of the LIM rail while accepting less favourable commercial terms,” he added.

Prasarana is spending some RM7 billion for the extension of both the Kelana Jaya and Ampang LRT rail networks. The Ampang network will be extended by another 17.7km.

The wholly-owned unit of the Finance Ministry was forced to cave in to pressure from Malay rights groups last month when it revised pre-qualification criteria for several construction packages for the Klang Valley Mass Rapid Transit (MRT) by allowing joint-ventures or consortiums.

It had on March 30 imposed additional criteria on contractors taking part in the project tender which disallowed them from forming joint ventures or consortiums. Perkasa, however, accused Prasarana of blocking Bumiputera contractors from participating by enforcing “strict” guidelines that would only benefited “rich non-Bumis”, saying that project delivery partner MMC-Gamuda was “looting and monopolising” the project.

The MRT is expected to be the largest-ever construction project in Malaysia and had earlier been estimated to cost between RM36 billion and RM53 billion.

This entry was posted on Friday, 17 June 2011, 10:27 am and is filed under Corporate, Corruption. You can follow any responses to this entry through RSS 2.0.

The standard operating procedure is to award to the consortium that has the highest cost. Plus that consortium must have the biggest “holes” in their bid so that there will be chances for “reopeners” or “variation orders”.

Anything other than these two criteria, you might as well pack your bags and go home.